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Vantage Point: Hong Kong-listed Vantage International, which has focused on the SAR's real estate market until now, is setting its sights on the PRC. Photo: Company


VANTAGE INTERNATIONAL (Holdings) Ltd (HK: 9) had a very robust six months, with April-September net profit more than doubling year-on-year to over 61 mln hkd on a 27% revenue increase to 1.2 bln.

But the 34-year old Hong Kong-based construction and engineering firm is looking to expand into the far larger PRC property market, beginning with the northern port city of Tianjin.

“We have made strides in expanding to the property markets in Mainland China by entering into a sale and purchase agreement on August 26, with the aim of acquiring a property located in Tianjin,” said Vantage Chairman Ngai Chun Hung.

 

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Mr. Ngai said the sudden wanderlust for Hong Kong's well-established construction player did not mean Vantage would in any way neglect the still fruitful contract opportunities in the Special Administrative Region (SAR).

 

“Recent economic figures reveal the economy in Hong Kong has continued to improve and property prices, especially in the residential and retail shop sectors, have continued to soar. In addition, the unemployment situation has seen a cross-industry improvement in the third quarter of 2010.”

However, Vantage International was also fully cognizant of the potential risks of overheating in Hong Kong’s real estate market and this was a major factor prompting the company to not only spread its exposure geographically, but begin hitching its wagon to the property juggernaut that is the PRC.

“Against this backdrop of a booming economy in Hong Kong, management is vigilant of increasing risks of a property market bubble, rising wages and inflation. Therefore, management will keep up the prudent approach in project management and cost controls,” he said.

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Well Schooled: Vantage's name is on the list of construction firms having built dozens of Hong Kong schools. Photo: Company

Yet unlike a lot of the major Hong Kong-based developers who often charge pell-mell into the mainland property sector chasing different tier-citied markets spread across the country, Vantage was initially focusing on the northern Chinese city of Tianjin, the largest port north of Shanghai and home to the mega-growth sprawling portside district of Binhai New Area.

In fact, Binhai is a strategically significant beachhead from which Vantage can hone its skills in the market and set its sights on expanding elsewhere.

At the same time, Binhai is a booming commercial/residential area nestled up against Tianjin, the second biggest city in Northern China with a population approaching 13 million, making it the country’s fifth most densely populated urban area.

And with annual per capita at No.3 in China at nearly 70,000 yuan, the combination of a relatively prosperous population and a crowded city center makes Vantage International look very savvy indeed for choosing a booming city suburb from which to launch its mainland foray.

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"We have made strides in expanding to the property markets in Mainland China," says Vantage Chairman Ngai Chun Hung (center). Photo: Company

The August 26 purchase agreement involves Vantage International conditionally agreeing to purchase from Golden More Ltd the entire issued capital of Golden Lux Holdings Ltd for a consideration of 320 mln hkd, payable in cash of 20 mln hkd and 300 mln shares to be issued by the company, with the shares currently trading at 0.98 hkd apiece.

The deal has yet to be finalized, but is expected to be fully approved soon.

Mr. Ngai said the Tianjin property is a 31-storey complex, consisting of shopping arcade, commercial and residential units, which is under construction on a parcel of land located in the Binhai New Area.

Upon completion of construction, the complex is expected to have a total gross floor area of approximately 76,839 square meters, with work likely to be completed before the end of 2012.

And Tianjin’s Binhai New Area was getting a lot of support from the country’s capital – Beijing – just a 90 minute high-speed train journey away.

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Current price: 0.98 hkd

“Tianjin Municipal is one of the major cities in Mainland China. In particular, the Binhai New Area is the focal developing area in Tianjin with an immense potential for economic growth. The Outline of the 11th Five-Year Plan for the Development of National Economy and Society in the People’s Republic of China approved in 2006 has indicated that the development of Tianjin Binhai New Area is part of the overall national development strategy of China,” he said.

If the expected deal is finalized, and Vantage indeed has a strong foothold in the PRC from the outskirts of Tianjin, the company believes that the sky is the limit in terms of further expansion into mainland China’s property sector.

This important decision (in the 11th Five-year Plan) will surely provide great momentum and favorable conditions to boost the development of Tianjin. Therefore, we consider the transactions contemplated under the agreement will provide a good opportunity for Vantage International to expand its property development and investment horizon to mainland China,” Mr. Ngai said.

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